Brent crude prices fell nearly 5% on Tuesday, wiping out all of Monday’s gains, as expectations of new United States–Iran talks and a sharp downgrade in demand growth from the International Energy Agency (IEA) pushed prices lower.
Analysts at Commerzbank said weakening consumption forecasts are now overwhelming earlier optimism tied to a possible resumption of diplomatic negotiations between Washington and Tehran.
Price slide comes despite large gains this year
The pullback comes even though Brent remains 31% above levels seen at the start of the conflict and 56% higher since the beginning of the year.
The IEA warned that the ongoing war could wipe out global oil demand growth this year, something not seen since 2020, when the pandemic triggered a steep collapse in fuel consumption.
IMF keeps base oil price view but flags risk scenario
The International Monetary Fund (IMF) left its baseline scenario for 2026 unchanged, projecting an average Brent price of USD 82 per barrel, assuming the conflict remains short-lived.
Under a less favorable scenario in which geopolitical tensions persist, the IMF expects average oil prices to reach USD 100 per barrel, combined with weaker global economic expansion.
Market caught between diplomacy and disruption
The latest price move reflects a market pulled between two opposing forces: tentative diplomatic progress and severe supply disruption.
A US official said communication channels with Tehran have never fully closed and have made progress. A 20‑hour round of talks, however, collapsed on April 12 without an agreement, returning relations to their tense pre-war status.
At the same time, the physical oil market has been hit hard. The IEA described the current supply shock as the largest in history, with global output tumbling by 10.1 million barrels per day in March following the effective closure of the Strait of Hormuz.
IEA and OPEC forecasts diverge sharply
In its latest monthly report, the IEA reversed its outlook for 2026 and now expects global oil demand to contract by 80,000 barrels per day. Just a month earlier, it had projected demand growth of 640,000 barrels per day.
OPEC’s April report painted a very different picture, keeping its forecast for 2026 demand growth unchanged at 1.38 million barrels per day.
The gulf between the two leading energy agencies underlines the unusually high uncertainty surrounding the medium‑term oil outlook.
Peace hopes or recession fears?
For traders, the central question is whether falling energy prices signal rising hopes for a diplomatic breakthrough or mounting worries about a global downturn. That makes the health of the broader economy a critical indicator to track.
Recent manufacturing data are sending mixed signals. The J.P.Morgan Global Manufacturing PMI slipped to 51.3 in March from a 44‑month high in February, suggesting that growth is losing momentum. Consensus forecasts point to a further slowdown in April, with the S&P Global Flash US Manufacturing PMI expected at 50.5, only marginally above the expansion threshold.
Shipping and inventories hint at softer demand
Physical trade indicators tell a somewhat more resilient story. The Baltic Dry Index, which tracks shipping costs for bulk commodities, has risen for eight consecutive sessions to its highest level since December, indicating that demand for raw materials remains solid for now.
However, US stockpile data point to softer oil consumption. The latest figures from the US Energy Information Administration, for the week ending April 3, showed an unexpected build of 3.1 million barrels in commercial crude inventories. That increase suggests that, at least in the United States, supply is currently outpacing demand.
Curious how macro news like oil moves affect Bitcoin? Explore our deep-dive on interest rates and Bitcoin next.
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